DeFi stands for “decentralized finance” and refers to a financial technology based on blockchain technologies and cryptocurrencies. Essentially, DeFi aims to provide traditional financial services such as lending, trading, wealth management and more without centralized intermediaries or middlemen. Here are some fundamental aspects of DeFi:
- Decentralization: Unlike traditional financial systems, which are often controlled by banks or other centralized institutions, DeFi platforms are decentralized. They use blockchain technologies to handle transactions and processes directly between users.
2 Smart Contracts: DeFi platforms use smart contracts, which are self-executing contracts on the blockchain. These programmable contracts enable automated and transparent financial operations without a centralized intermediary.
- lending and borrowing services:* DeFi allows users to lend or borrow without relying on a bank. This is often done through platforms that use peer-to-peer lending or algorithmic lending.
4 Liquidity and trading: DeFi platforms also offer decentralized trading opportunities for cryptocurrencies. Users can exchange assets directly without relying on centralized exchanges.